09/03/2015 - 16:49

Privatisation part of the cycle

09/03/2015 - 16:49


Upgrade your subscription to use this feature.
Privatisation part of the cycle

WA has achieved a balanced position on privatisation of public assets, but the anti-sale voices are getting louder, unfortunately.

WESTERN Australia has a rich history of successful privatisations, as the research in this week’s feature shows.

That ‘privatisation’ has again become a dirty word in politics says more about the negativity of that field than the reality of sensible policy.

Much of our economy is underpinned by companies that were once state owned but now operate in private hands, generally in competitive markets.

Australia is no longer in the airline business, the telecommunications sector (although it is pushing its way back in with the NBN) or the banking business. This state, too, has exited similar fields such as banking, insurance and retail gas, as well as selling infrastructure such as the Dampier to Bunbury Natural Gas Pipeline.

Does anyone really believe government exits from any of those businesses has to been to detriment of the nation or WA?

We ought to be proud of our ability to use community funds to create enterprises and build assets and we ought to enjoy the windfall they create when state backing is no longer needed.

There are times when governments need to do things that the private sector can’t. For security or to provide common infrastructure for future development, government ownership can be positive.

But such arrangements ought to be reviewed regularly, with a view to getting out as soon as is appropriate. The sale price should not be a major objective either. For every dollar a state gains selling, there is a consequential loss to the public in another manner. If new buyers pay too much, they pass that on. Or if assets are bundled and protected too much by regulation that enhances their price, the consumers pay for a lack of choice.

Unfortunately the exit-at-earliest-convenience strategy is too often ignored because of politicians’ propensity to use state entities as powerful playthings at election time. Unions play on job security because, surprise, surprise, private operators expect efficiency.

Oppositions bleat about a rise in the cost of services because non-state owners can’t subsidise one customer at the expense of taxpayers.

Given the difficulty in selling assets at the moment, governments are wise to increasingly adopt the twin strategies of private procurement and contracting out.

Despite the headlines condemning these strategies or overstating mainly minor operational issues, these methods have been used more often than most people realise and work remarkably well in this state.


ANOTHER form of state control is the licence requirements for various commercial activities.

In some ways these are a greater drain on the economy than state-owned assets, because private owners hide behind government-imposed quotas, reducing competition at the expense of consumers (who pay higher prices).

In some cases the value lost to the state can be extrapolated from the value the market applies to such licences when traded between private parties. The market rate for a restricted licence represents the perceived future earnings from that licence to the prospective purchaser.

This newspaper has already stated the case for deregulation in fields such as potato growing and taxis, but there are many others where livelihoods are based on the state’s direct control of who may or may not enter a market.

A similar issue has also arisen in relation to the export of food.

The health scandal around imported frozen berries has highlighted the lax standards of foreign food production and poor labelling laws. It has also returned the focus to the high costs of local production, often created by unnecessary regulation by our export bureaucracy.

It is absurd that imported food can be less rigorously tested than exported produce. This is another way of putting an unnecessary cost burden on the local sector and preventing it from operating competitively. Surely the reputation of food, especially food produced in this country, should be left to the brands that represent it.

A much cheaper option is to require accurate food labelling that gives the consumer, here or abroad, the information they need to make a purchasing decision, rather than an expensive licensing regime that just makes it too hard for our farmers to compete.


Subscription Options